Bouncing Back from Bad Credit

Time may heal all wounds, but in the case of a bad credit history, there are a few other methods of financial first aid. These include paying bills on time, using your charge cards in a healthy way, and cleaning up your credit report.

Resiliency is a defining trait among winning athletes. The player who loses, but learns from his defeat, will win big in the long run.

What holds true for the world of sports also applies to a consumer's financial world. A setback such as bad credit can inflict significant short-term damage. If you learn from your mistakes, however, you can develop solid financial skills over the long term. Here are some tactics that can help you bounce back from bad credit:

Improve your bill-paying system

Making late payments on your credit cards, home mortgage, or car loans will lower your credit score. If you find that you lack the organizational skills to keep your bills straight, it's time to develop a payment system.

Don't create anything too complex-the key is to devise a system that's easy to follow. Consider paying your bills the moment they come in the mail, or sitting down on the first and fifteenth day of each month and writing out checks. Also consider creating a budget. It will help ensure that you have enough money in your bank account when those bills come due.

Use credit cards wisely

Credit cards should only be used for convenience and to take advantage of rewards programs. If you need to buy something, think of the card as a check. Only use it if you fully intend to make the entire payment at the end of the month.

If you view plastic as a personal loan, you'll soon find yourself spending hundreds of dollars on double-digit interest rates. Pay off your balances in full each month, and you'll avoid finance charges. You can also apply for a card with a rewards program. If you make your payments on time, you'll come out ahead with the rewards that the card pays out.

Clean up your credit report

It's not uncommon in this high-tech world for a mistake or two to appear on your credit report. If a late payment was reported erroneously, it could lower your score-all without your even knowing it.

Be proactive and contact the three credit bureaus-Equifax, TransUnion, and Experian-for a report. Examine it carefully. If you find mistakes, contact the bureau immediately. Simply by cleaning up one or two mistakes, the score on your report could rise, and you could find yourself qualifying for better loans.

By:Greg Mischio